The recent changes made to unit-linked insurance plans are going to pinch the agents that sell these insurance products the most.With the new cap on the charge during the term of the policy, agents are set to see a significant 500-600 basis points fall in commissions.

The Insurance Regulatory & Development Authority has capped the charges from the fifth year to around four per cent of the annual premium paid.

Thereafter, charges will be reduced further during the tenure of the policy. For plans of 15 years and above, the charges will be restricted to 2.25 per cent of the yearly premium.

The new guidelines will be applicable from September 1.

“The commission structure can’t sustain an agent’s income. So, agency channels will suffer badly. For the first year, commission will fall to five per cent and from the second year, it would fall to two per cent,” said Bajaj Allianz Life Insurance MD and CEO, Kamesh Goyal.

In January, when overall charges were earlier capped, the average commission had fallen to 12 per cent from the earlier 15 per cent. The regulator had allowed commissions of up to 40 per cent.

“Those who did not reduce commissions in the first round in January will have to cut now,” said a senior executive at SBI Life. Echoed Aviva Life MD and CEO T R Ramachandran: “The commission is set to see a fall from 15 per cent to nine per cent.”

The insurance regulator has also mandated that overall charges be distributed in an even fashion during the new lock-in period of five years (it was three years earlier).

“Premium levels will increase as the charges are capped,” said Reliance Life MD and CEO Malay Ghosh. He said Reliance Life’s 15 per cent commission might fall to single digits.